(USAGOLD – 6/10/2019) – Gold corrected overnight on news that Mexico would take steps to stem migrant flow to the United States, thus avoiding the imposition of new tariffs. It is down $11 at $1329. Silver is downm 22¢ at $14.77. The move to the downside comes after a week that saw gold move $65 higher from its $1275 starting point on May 30 to its $1240 close on Friday.
We asked Zac Storella from Counting Pips, a widely-acknowledged expert on the COMEX Commitment of Traders reports, what he saw in last week’s numbers. His response is worth noting:
“This week’s change in speculative positions (Commitment of Traders) for gold jumped by a total of +69,427 net contracts. This is the largest one-week gain on record, according to the CFTC data dating back to 1986. The current net position (long positions minus short positions) is now at the most bullish level in over a year – showing that sentiment for gold is coming back into favor.
Speculator sentiment is and has been an important aspect to a strong gold price. Speculators are generally trend-followers (buying higher prices, selling lower prices) and on a running three-year basis, we have found a strong correlation between speculator net positions and the gold price.
The week’s change did include a healthy amount of speculators covering their short positions as the total number of short positions fell by -23,413 contracts. However, the stronger case for gold is that almost twice as many long contracts positions were initated (+46,014 long contracts) compared to the short covering. With a combination of new long positions and declining short positions, any which way you look at it, this was a strong week for gold and gold bulls.“
Bloomberg reports hedge funds boosting their “long position in bullion by the most in almost 12 years” in a revival of safe-haven demand. It also quotes INTL FC Stone’s Rhona O’Connell, the London-based gold market analyst, as saying that “bullion might reach $1400 this year.” She went on to say that “all the dominant asset classes have a question mark over them at the moment which is generally when gold comes into play.” In short, there is much on financial markets’ table yet to be resolved not the least a push among key G-20 central banks to potentially resurrect quantitative easing and lower interest rates.
Note: We post the Zac Storella’s Commitment of Traders review weekly here at USAGOLD.
Quote of the Day
“The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.” – Rudy Dornbusch, economist
Chart of the Day
Chart note: “Central bank net purchases reached 651.5t in 2018, 74% higher year over year,” says the World Gold Council in its year-end gold demand report. “This is the highest level of annual net purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record. These institutions now hold nearly 34,000 tonnes of gold. Heightened geopolitical and economic uncertainty throughout the year increasingly drove central banks to diversify their reserves and re-focus their attention on the principal objective of investing in safe and liquid assets.”